Evaluating the German "Mini-Job" Reform Using a True Natural Experiment

Discussion Papers 569, 21 S.

Marco Caliendo, Katharina Wrohlich

2006. Mar.

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Published in: Applied Economics 42(2009) Iss. 19, 2475-2489


Increasing work incentives for people with low incomes is a common topic in the policy debate across European countries. The "Mini-Job" reform in Germany - introduced on April 1, 2003 - can be seen in line with these policies, exempting labour income below a certain threshold from taxes and employees' social security contributions. We carry out an ex-post evaluation to identify the short-run effects of this reform. Our identification strategy uses an exogenous variation in the interview months in the German Socio-Economic Panel, that allows us to distinguish groups that are (or are not) affected by the reform. To account for seasonal effects we additionally use a difference-in-differences strategy. The results show that the short-run effects of the reform are limited. We find no significant short-run effects for marginal employment. However, there is evidence that single men who are already employed react immediately and increase secondary job holding.

Katharina Wrohlich

Head in the Gender Economics Department

JEL-Classification: C25;H31;J68
Keywords: Evaluation, natural experiment, difference-in-differences, marginal employment
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